LEADERSHIP SERIES

Quarterly Market Update

PRIMARY CONTRIBUTORS

Lisa Emsbo-Mattingly Director of Asset Allocation Research

Dirk Hofschire, CFA SVP, Asset Allocation Research

Jake Weinstein, CFA Senior Analyst, Asset Allocation Research

Cait Dourney, CFA Analyst, Asset Allocation Research

FIRST QUARTER 2018

Asset Markets 3.

Table of Contents

Market Summary 1.

Economy/Macro Backdrop 2.

Long-Term Themes 4.

Market Summary

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MACRO

4

• Synchronized global acceleration amid

low inflation

• Low volatility and broad rise in asset prices

ASSET MARKETS

Q4 2017

OUTLOOK • Global expansion continues but activity peaks

amid China’s less supportive policies

• U.S. economy healthy though cycle becoming

more mature

• Shift toward global monetary policy

normalization likely to reduce liquidity growth

• Monetary shift to boost market volatility

• Smaller allocation tilts at this point in the cycle

• Prioritize diversification, including inflation-

resistant assets and international equities

Monetary Shift May Stoke Volatility after Near-Perfect 2017 The year 2017 was defined by a near-perfect backdrop of steady global growth, low inflation, and

accommodative monetary policies. In 2018, we expect the synchronized global expansion to continue, but it

should also give global policymakers confidence to generally shift toward reducing monetary accommodation,

which has the potential to stoke an increase in market volatility from extremely low levels.

Diversification does not ensure a profit or guarantee against a loss.

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Q4 2017 (%) 2017 (%) Q4 2017 (%) 2017 (%)

Emerging-Market Stocks 7.5 37.8 Long Government & Credit Bonds 2.8 10.7

Non-U.S. Small-Cap Stocks 6.1 33.5 Emerging-Market Bonds 0.5 9.3

Non-U.S. Developed-Country Stocks 4.3 25.6 Real Estate Stocks 2.5 8.7

U.S. Large-Cap Stocks 6.6 21.8 High-Yield Bonds 0.4 7.5

U.S. Mid-Cap Stocks 6.1 18.5 U.S. Corporate Bonds 1.0 6.2

U.S. Small-Cap Stocks 3.3 14.6 Investment-Grade Bonds 0.4 3.5

Gold 0.6 12.7 Commodities 4.4 0.7

20-Year U.S. Stock Returns Minus Bond Returns Since 1926 Return Difference (%)

Past performance is no guarantee of future results. It is not possible to invest directly in an index. See appendix for important index information. Assets

represented by: Commodities – Bloomberg Commodity Index; Emerging-Market Bonds – JP Morgan EMBI Global Index; Emerging-Market Stocks – MSCI

EM Index; Gold – Gold Bullion, LBMA PM Fix; High Yield Bonds – Bank of America Merrill Lynch (BofA ML) High Yield Bond Index; Investment-Grade

Bonds – Bloomberg Barclays U.S. Aggregate Bond Index; Non-U.S. Developed-Country Stocks – MSCI EAFE Index; Non-U.S. Small-Cap Stocks – MSCI

EAFE Small Cap Index; Real Estate Stocks – FTSE NAREIT Equity Index; U.S. Corporate Bonds – Bloomberg Barclays U.S. Credit Index; U.S. Large-Cap

Stocks – S&P 500 Index; U.S. Mid-Cap Stocks – Russell Midcap Index; U.S. Small-Cap Stocks – Russell 2000 Index; U.S. Treasury Bonds – Bloomberg

Barclays U.S. Treasury Index. Source: Bloomberg Finance L.P., Haver Analytics, Fidelity Investments (AART), as of 11/30/17.

Average Since 1926: 5%

2%

Broad-Based Rally in Asset Prices Led by Non-U.S. Stocks Non-U.S. equities outperformed the U.S. stock market for the first calendar year in the past five, bolstered by a

weaker dollar and a strengthened economic backdrop. Credit spreads tightened amid the “risk-on” tone,

boosting emerging-market and high-yield bonds. Steady longer-term interest rates kept high-quality bonds in

the black, and all major asset categories posted positive returns.

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18%

8% 8%

6%

0%

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-8% -7%

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EM Equity U.S. Equity DM Equity HY Bonds

6

0%

-5%

S&P 500 in 2017

0 Months with a Negative Return

0 Days with <-2% Drawdowns

0 Days with VIX Above Historical Avg.

VIX Hit All-Time Low

0 = Historical Average

Return Since Feb-16

Volatility Since Feb-16

Returns and Volatility (Since Feb-16 Relative to Long Term)

VIX = U.S. equity volatility index. Past performance is no guarantee of future results. Asset class indices as defined on prior slide. Long-term history

is since 1950 for all asset classes except EM equity, which is since 1988. Source: Haver Analytics, Fidelity Investments (AART), as of 12/31/17.

Extremely Low Volatility Amid Remarkably Good Returns Global assets experienced remarkably low levels of volatility. Since equity markets hit a bottom in early 2016,

riskier assets have registered gains far above their long-term historical averages, even as their price fluctuations

were far below average. U.S. stock-price moves were particularly tranquil during 2017.

Relative to Historical Average (Annualized)

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1-Year Relative Return Share Rising 6-Month Basis (%)

Equity Style Performance and Global Growth Info Tech. Sector Weight: 1999 vs. 2017

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Value Minus Growth Return Global LEIs

ENE = energy sector; MAT = materials sector. LEIs = leading economic indicators. LEFT: Past performance is no guarantee of future

results. Source: Haver Analytics, Fidelity Investments (AART), as of 12/31/17. RIGHT: U.S. equity market = S&P 500 index, EM equity

market = MSCI EM index. Source: FactSet, Fidelity Investments (AART), as of 12/31/17.

5%

10%

15%

20%

25%

30%

35%

1999 2017

U.S. Equity Market EM Equity Market

Info. Tech Sector Weight

ENE + MAT

Weight

ENE + MAT

Weight

Growth and Tech Led During Non-Inflationary Global Boom 2017 was a rare year when an accelerating global economy accompanied a large outperformance by growth

stocks relative to their value counterparts, somewhat reminiscent of the large-cap technology stock leadership

of the late 1990s. Emerging-market gains in 2017 were also spearheaded by tech stocks, which became the

largest sector in the EM equity index and roughly twice the weight of the energy and materials sectors.

Economy/Macro Backdrop

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DYNAMIC ASSET ALLOCATION TIMELINE

Business Cycle

(10–30 years)

Secular

HORIZONS

(1–10 years)

Tactical (1–12 months)

Portfolio Construction

Asset Class | Country/Region | Sectors | Correlations

For illustrative purposes only. Source: Fidelity Investments (AART).

Multi-Time-Horizon Asset Allocation Framework Fidelity’s Asset Allocation Research Team (AART) believes that asset price fluctuations are driven by a

confluence of various factors that evolve over different time horizons. As a result, we employ a framework that

analyzes trends among three temporal segments: tactical (short term), business cycle (medium term), and

secular (long term).

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LEFT: Source: Z-score is calculated from quarterly inflation and Real GDP data since 1947. Shaded areas represent U.S. recessions. Source:

Bureau of Labor Statistics, National Bureau of Economic Research, Haver Analytics, Fidelity Investments (AART), as of 11/30/17. RIGHT: Street

EPS expectations for MSCI ACWI ex-U.S. over next 12-months. Source: MSCI, Fidelity Investments (AART), as of 11/30/17.

10

90

95

100

105

110

115

120

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

(2.0)

(1.5)

(1.0)

(0.5)

-

0.5

1.0

1.5

2.0

2.5

1981 1985 1989 1993 1997 2001 2005 2009 2013 2017

Inflation Growth

Z-Score

U.S. Growth and Inflation Volatility Global Earnings Expectations ex-U.S.

Index January = 100

2017

2016

2015

Higher Volatility

Lower Volatility

Low-Volatility Fundamentals Created Ideal Market Backdrop In 2017, low asset-market volatility was underpinned by economic fundamentals, such as growth and inflation,

that also registered steady trends amid falling volatility. For the first time in years, global corporate earnings

expectations rose throughout the year and finished on an upswing. In 2018, we expect fundamentals to begin on

a high note, with some fraying in this picture as the year progresses.

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Note: The diagram above is a hypothetical illustration of the business cycle. There is not always a chronological, linear progression among the

phases of the business cycle, and there have been cycles when the economy has skipped a phase or retraced an earlier one. Source: Fidelity

Investments (AART), as of 12/31/17.

Business Cycle Framework

Most Synchronized Global Expansion in Years The global economy is experiencing a steady, synchronized expansion, with low global recession risk. Broadly

speaking, most developed economies are in more mature (mid-to-late) stages of the business cycle, with the

eurozone not as far along as the United States. Moving forward, less accommodative policy in several

developed and emerging countries may constrain the upside to growth.

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-75%

-50%

-25%

0%

25%

50%

75%

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Share of New Export Order PMIs >50 Chinese Import Growth

Note: Blue series includes 32 countries. Source: Markit, China Customs, Haver Analytics, Fidelity Investments (AART), as of 12/31/17.

12

Global New Export Orders and China Import Growth

Share (%) Change (Year-Over-Year)

Strong Trade Continues to Reinforce Global Growth The global expansion continues to be underpinned by solid global export and manufacturing sectors. China’s

rising import demand over the past year has helped push the percentage of major countries with increasing

new export orders to nearly 90%. The outlook for global trade, industrial activity, multinational profits, and

commodity prices will be determined largely by China’s cyclical trajectory.

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Source: Bank for International Settlements, Organization for Economic Cooperation & Development, China National Bureau of Statistics, Haver

Analytics, Fidelity Investments (AART), as of 6/30/17. Table as of 11/30/17.

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80%

100%

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220%

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Ratio

China U.S.China Credit Growth

Last 15 Years 18%

2015-2016 22%

2017 11%

Private Sector Debt-to-GDP Ratios

Massive Debt Build-Up Triggers Policy Tightening in China China’s private sector borrowed at a rampant rate over the past decade, far surpassing peak U.S. leverage

levels prior to the 2008 financial crisis. Chinese policymakers have begun to tighten financial conditions,

resulting in the sharpest deceleration in credit growth in nearly a decade. China’s economy remains broadly

steady, but less-supportive policies make the outlook more uncertain and a growth deceleration probable.

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0%

1%

2%

3%

4%

5%

6%

2% 3% 4% 5% 6% 7% 8%

Pre-Recession Post-Recession

U-6 minus U-3 Unemployment Rate Gap

November 2017

November 2014

U.S. Phillips Curve: Extra Labor Market Slack vs. Wage Inflation

Wage inflation: Atlanta Fed Wage Tracker. Unemployment rate gap is the difference between U-6 and U-3 unemployment and captures the number

of workers who are either working part time due to economic reasons or are discouraged and have left the labor force. Pre-recession refers to

1997-2008, and post-recession refers to 2009-2017. Source: Federal Reserve, Bureau of Labor Statistics, Haver Analytics, Fidelity Investments

(AART), as of 11/30/17.

Wage Inflation (Year-Over-Year)

Tighter Labor Markets Support Wage Growth, Consumers With the unemployment rate at a cyclical low of 4.1%, tightening labor markets continue to boost consumers

and keep U.S. recession risk low. Extra labor market slack, measured by workers who leave the market or are

forced into part-time work, has dropped dramatically during the past several years and gradually pushed up

wage growth. Inflation is still low, but moving toward full employment should continue to support wage gains.

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4%

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LEFT: *Listing of both blue and orange circles indicates evidence of both mid- and late-cycle traits. Source: Fidelity Investments (AART), as of

Dec. 31, 2017. RIGHT: Grey bars represent U.S. recessions. Source: Bureau of Economic Analysis, Haver Analytics, NBER, Fidelity Investments

(AART), as of 11/30/17.

15

Mid- to Late-Cycle Phase Transition U.S. Profit Margins

Indicator Typical Late Cycle

Current Cycle

Mid Cycle

Late Cycle

Corporate Profits* Margins decline

Inventories Rise relative to orders

Employment Pace of hiring slows

Wage Growth* Accelerates

Monetary Policy Fed tightens, yield

curve flattens

Credit Lending standards

tighten

Non-Financial Corporate After-Tax Profits Over Revenues

U.S. Economy a Mix of Mid- and Late-Cycle Dynamics The U.S. has remained on a very gradual progression through its business cycle, with mid-cycle dynamics

remaining solid and just a few hints of late-cycle trends. As is customary during a late-cycle phase, corporate

profit margins have declined from peak levels, but restrained wage growth and robust global conditions have

allowed margins to stay high and corporate profit growth to remain firm.

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-100 0 100 200 300

Current Level

Historic Late-Cycle Troughs (Avg)

Historic Mid-Cycle Peaks (Avg)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3-M

o

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rs

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U.S. Treasury Yield Curve

Basis Points

2017

2016

LEFT: Source: Bloomberg Financial L.P., Fidelity Investments (AART), as of 12/31/17. RIGHT: Data since 1950. bps: Basis Points.

Source: Bloomberg Financial L.P., Fidelity Investments (AART), as of 12/31/17.

Yield Curve (10 Year–3 Months)

Yield

Yield Curve Has Flattened but Remains Relatively Steep The yield curve is an important indicator, having inverted before the previous seven U.S. recessions. In

December, the Federal Reserve hiked policy rates for the third time during 2017, pushing up short-term rates

and causing the yield curve to flatten by about 100 basis points. The curve, however, remains positively sloped

and steep relative to prior late cycles, and credit and financial conditions have yet to tighten measurably.

Historic Mid-Cycle

Peaks (Avg.)

Historic Late-Cycle

Troughs (Avg.)

Current Level

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WTI: West Texas Intermediate crude oil. Headline CPI: Consumer Price Index. Core CPI excludes Food and Energy. LEFT: Source: European

Central Bank, IHS Markit, Haver Analytics, Fidelity Investments (AART), as of 11/30/17. RIGHT: Scenarios assume AART core CPI and food cost

growth rate forecasts under various average prices of oil for 2018. Bureau of Labor Statistics, Bloomberg Finance L.P., Fidelity Investments

(AART), as of 11/30/17.

17

49

50

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0.0

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1.5

2.0

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Eurozone Core CPI Global PMI: Output Prices

Eurozone and Global Inflation

Year-Over-Year Index: >50 = Prices Rising

U.S. Inflation Under Various Oil Scenarios

Year-Over-Year

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

2.6%

2.8%

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Headline CPI

$70 WTI

Futures

Curve

$50 WTI

Global Inflation Firming with Upside Risks Global inflation remained tame in 2017, but evidence of price pressures has materialized. Eurozone core

inflation has been on a steady rise, and PMIs in almost all of the world’s largest economies have reported

rising prices. In the U.S., inflation will likely remain firm even if oil prices don’t continue to rise. We don’t

expect a dramatic acceleration in inflation in 2018, but there are upside risks given low investor expectations.

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-$175

-$150

-$125

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$0

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$0

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$2,500

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G4 Central Bank Assets EME, EMD & HY Fund Flows

Billions (12-Month Change) Billions (12-Month Cumulative, 12-Month Lag)

Fund Flows: Mutual funds and ETFs. EME: Emerging Market Equity. EMD: Emerging Market Debt, HY: High Yield. Dotted line estimates

future central bank assets: Fed to roll-off balance sheet assets by lesser of stated caps or total bonds maturing each month. ECB to

begin tapering in January 2018 to EUR30B of monthly purchases for 9 months. BOJ to purchase at annualized rate of JPY 60T going

forward. BOE to keep balance sheet constant. Source: Federal Reserve, Bank of England (BOE), European Central Bank (ECB), Bank of

Japan (BOJ), EPFR, Haver Analytics, Fidelity Investments (AART), as of 11/30/17.

Fed, ECB, BOJ, BOE Balance Sheets and Asset Flows

QE Unwind to Challenge Global Liquidity Growth We believe growth and inflation are firm enough to keep global policymakers moving toward a reduction in

monetary accommodation. Growth in major central bank balance sheets is set to drop by $1.4 trillion over the

next 12 months as the Fed winds down its balance sheet and the ECB pares back on quantitative easing. The

deceleration in liquidity growth may neutralize a key support for riskier asset prices and lower volatility.

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Shading represents U.S. economic recession as defined by the National Bureau of Economic Research (NBER). The seven-year lead in real

intellectual capex compares what happened with capital investment (capex) seven years ago to what is going on with productivity today, to highlight

the importance of capex in generating future productivity gains. Source: NBER, Bureau of Economic Analysis, Bureau of Labor Statistics, Haver

Analytics, Fidelity Investments (AART), as of 9/30/17.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0%

2%

4%

6%

8%

10%

12%

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Real Intellectual Property Capex Real Productivity

U.S. Capex and Productivity

10-Year Annualized Rate,

Leading 7 Years 10-Year Annualized Rate

Business Policy Changes

Corporate tax cuts

Deemed repatriation of foreign earnings

Improved competitiveness of U.S. corporate tax regime

Lighter regulation

Will Pro-Business Policies Support Capex & Productivity? New tax legislation may help boost business confidence and make more cash available to corporations, and

some of the proceeds from tax cuts and foreign-earnings repatriation might go toward additional capital

expenditures. After years of corporate under-investment, however, any cyclical uptick in capex may take a

while to boost productivity growth, which typically follows capex growth on a lagged basis.

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-10%

-8%

-6%

-4%

-2%

0%

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LEFT: Source: Congressional Budget Office, Fidelity Investments (AART), as of 2/28/15. RIGHT: Dashed line represents CBO projections.

Source: Congressional Budget Office, Haver Analytics, Fidelity Investments (AART), as of 9/30/17.

Impact of $1 Fiscal Stimulus Boost over

Next Two Years

$0.0

$0.5

$1.0

$1.5

Outputbelow

potentialand Fed'sresponse

limited

Outputclose topotential

and Fed'sresponse

typical

IndividualLow andMiddleIncome

IndividualHigh

Income

Corporate

Timing of Stimulus

U.S. Fiscal Deficit

Deficit as a Share of GDP Type of Tax Cuts

Limited Tax-Cut Stimulus, but Fiscal Policy on Easing Path We estimate the tax legislation will provide a modest 0.3% boost to GDP over the next couple of years, with the

cyclical impact limited by a muted multiplier effect. The stimulus multiplier is lower because there is little slack

left in the economy and a high proportion of the tax cuts go to low-multiplier businesses and high-income

individuals. Easier fiscal policy and rising deficits may put upward pressure on inflation and bond yields.

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Source: Bureau of Economic Analysis, Bundesbank, Bloomberg Financial L.P., Fidelity Investments (AART), as of 12/31/17.

21

U.S. and Germany Real 10-Year Bond Yields vs. Growth Rates

Real GDP

Growth

Real Bond

Yields

0.4%

-1.1%

2.3%

2.8%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

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U.S. Germany

Could Ultra-Low Real Bond Yields Extend Goldilocks Market? Major central banks have been slow to shift away from easy policies despite the global economic acceleration

over the past two years. Long-term, inflation-adjusted bond yields have barely budged in the U.S., and have

fallen further into negative territory in the eurozone and Japan. We believe policymakers have finally started to

acknowledge improved growth, but the cycle may be prolonged if they move more slowly than expected.

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5%

10%

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25%

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Global Imports/GDP

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Trade Globalization

LEFT: Source: International Monetary Fund (IMF), World Bank, Haver Analytics, Fidelity Investments (AART), as of 12/31/16. RIGHT: The size of

the circles represents total trade. The thickness of lines represents the volume of trade flows. The size of the circle and proximity to other countries

represents importance and interconnectedness. Grey circles represent other countries. Source: International Monetary Fund, Haver Analytics,

Fidelity Investments (AART), as of 12/31/15.

Less Globalized

More Globalized

Ratio

Global Trade Interdependence

Geopolitical Risks and Peak Globalization After decades of rapid global integration, economic openness stalled in recent years amid political pressures

in many advanced economies. Meanwhile, instability in North Korea represents a potential catalyst for higher

tensions between the U.S. and China. In a highly integrated global economy, political risks in the commercial

and security spheres may become intertwined and are likely to be elevated for the foreseeable future.

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Risks

Global monetary policy tightening may

incite market volatility

China’s policymakers’ evolving

tightening bias

23

Business Cycle

Asset allocation implications

U.S. between mid- and late-cycle

phase

Global economy in synchronized

expansion with low recession risk

Positive global economic momentum

may have peaked

Current environment continues to warrant an overweight to risk assets

Smaller asset allocation tilts are warranted at this time in the cycle

For illustrative purposes only. Source: Fidelity Investments (Asset Allocation Research Team).

Outlook: Market Assessment Fidelity’s Business Cycle Board, composed of portfolio managers responsible for a variety of global asset

allocation strategies, believes the current backdrop warrants an overweight to risk assets. However, the Board

believes global economic momentum may have peaked and expects higher volatility driven by risks to the

monetary, political, and economic outlooks. Smaller asset allocation tilts are merited at this point in the cycle.

Asset Markets

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EM: Emerging Markets. For indexes and other important information used to represent above asset categories see Appendix. Past performance is no

guarantee of future results. It is not possible to invest directly in an index. All indices are unmanaged. Sector returns represented by S&P 500 sectors.

Sector investing involves risk. Because of its narrow focus, sector investing may be more volatile than investing in more diversified baskets of

securities risk. Because of its narrow focus, sector investing may be more volatile than investing in more diversified baskets of securities.

Source: FactSet, Fidelity Investments (AART), as of 12/31/17.

25

U.S. Equity Styles Total Return International Equities Total Return

U.S. Equity Sectors Total Return

Q4 2017

Growth 7.6% 29.6%

Large Caps 6.6% 21.8%

Mid Caps 6.1% 18.5%

Small Caps 3.3% 14.6%

Value 5.1% 13.2%

Q4 2017

Info Tech 9.0% 38.8%

Materials 6.9% 23.8%

Consumer Discretionary 9.9% 23.0%

Financials 8.6% 22.2%

Health Care 1.5% 22.1%

Industrials 6.1% 21.0%

Consumer Staples 6.5% 13.5%

Utilities 0.2% 12.1%

Real Estate 3.2% 10.8%

Energy 6.0% -1.0%

Telecom Services 3.6% -1.3%

Q4 2017

ACWI ex-US 5.1% 27.8%

EAFE Small Cap 6.1% 33.5%

Europe 2.3% 26.2%

EAFE 4.3% 25.6%

Japan 8.5% 24.4%

Canada 4.5% 16.9%

EM Asia 8.4% 43.3%

Emerging Markets 7.5% 37.8%

EMEA 11.8% 25.2%

Latin America -2.2% 24.2%

Gold 0.6% 12.7%

Commodities 4.4% 0.7%

Fixed Income Total Return

Q4 2017

Long Govt & Credit 2.8% 10.7%

EM Debt 0.5% 9.3%

High Yield 0.4% 7.5%

Credit 1.0% 6.2%

Municipal 0.7% 5.4%

Leveraged Loan 1.1% 4.1%

CMBS 0.4% 3.5%

Aggregate 0.4% 3.5%

TIPS 1.3% 3.0%

MBS 0.2% 2.5%

Treasuries 0.1% 2.3%

Agency 0.0% 2.1%

ABS 0.0% 1.6%

Growth, Tech, EMs Cap Off a Stellar 2017 Q4 was another strong quarter for equity markets, with growth and emerging-market stocks continuing as the

strongest performers, fueled by the information technology sector. All major equity categories and sectors

ended the year with double-digit gains, except for energy and telecom stocks. Fixed income had modest

returns in Q4, but all bond categories and sectors posted positive returns for the year.

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TIPS: Treasury Inflation-Protected Securities. Past performance is no guarantee of future results. Asset class total returns are represented by

indices from the following sources: Fidelity Investments, Morningstar, and Bloomberg Barclays. Fidelity Investments: proprietary analysis of

historical asset class performance, which is not indicative of future performance.

0%

10%

20%

Mid Late

Stocks High Yield Commodities Investment-Grade Bonds

Asset Class Performance in Mid- and Late-Cycle Phases (1950–2010)

Mid-Cycle: Strong Asset Class Performance • Favor economically sensitive assets

• Broad-based gains

Late-Cycle: Mixed Asset Class Performance • Favor inflation-resistant assets

• Gains more muted

Annual Absolute Return (Average)

Historical Playbook for Mid- and Late-Cycle Phases Historically, the mid-cycle phase tends to favor riskier asset classes, while late cycles have the most mixed

performance of any business-cycle phase. The late cycle has often featured more limited overall upside and

less confidence in equity performance, though stocks have typically outperformed bonds. Inflation-resistant

assets, such as commodities, energy stocks, short-duration bonds, and TIPS have performed relatively well.

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For illustrative purposes only. Past performance is no guarantee of future results. It is not possible to invest directly in an index. All indices are

unmanaged. Please see appendix for important index information. Portfolio based on Dow Jones U.S. Total Stock Market Index, MSCI ACWI

ex-US Index, Bloomberg Barclay’s Aggregate Index, ICE BofAML U.S. High Yield Index as of 12/31/17.

27

-6%

-4%

-2%

0%

2%

4%

6%

8%

3 Years 5 Years 10 Years 20 Years

-6%

-4%

-2%

0%

2%

4%

6%

8%

3 Years 5 Years 10 Years 20 Years

75th percentile

25th percentile

Median

Annualized Real Return Annualized Real Return

Sample Portfolio: 40% Domestic Equity – 20% Foreign Equity – 30% IG Bonds – 10% HY Bonds

Portfolio Returns Starting in Mid Cycle Portfolio Returns Starting in Late Cycle

Cyclical Risk Turns Asymmetrical in the Late-Cycle Phase Over the intermediate term (3-5 years), the starting point in the business cycle has a meaningful impact on the

expected distribution of asset returns. Mid-cycle starting points tend to provide a positive skew to the returns

of a diversified portfolio. Although late-cycle starting points tend to experience positive returns on average,

they also exhibit greater equity market drawdowns and volatility, which widens the expected range of returns.

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Past performance is no guarantee of future results. DM: Developed Markets. EM: Emerging Markets. NTM: Next 12 months. EPS: Earnings per share.

Source: MSCI, FactSet, Fidelity Investments (AART), as of 12/31/17.

Global EPS Growth (Trailing 12 Months)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

201

2

201

3

201

4

201

5

201

6

201

7

U.S. DM EM

Change (Year-Over-Year)

EPS NTM Growth

Expectations

EM 21.0%

DM 9.0%

U.S. 12.0%

International Earnings Growth Outpaced U.S. EPS Growth Following several years of profit recession, international corporate earnings have accelerated for several

quarters and surpassed U.S. corporate profit growth in 2017. Earnings revisions have also stabilized for the

first time in years, although lofty forward-earnings-growth expectations may provide a tougher hurdle to clear

in the year ahead, particularly in emerging markets.

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DM

EM

U.S.

5

10

15

20

25

30

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

DM Trailing

EM Trailing

U.S. Trailing

Forward

P/E

29

International Market P/E Ratios

Ratio

DM: Developed Markets. EM: Emerging Markets. Past performance is no guarantee of future results. You cannot invest directly in an index. Please

see appendix for important index information. Price-to-earnings ratio (P/E) = Stock price divided by earnings per share. Also known as the multiple,

P/E gives investors an idea of how much they are paying for a company’s earnings power. Long-term average P/E for Emerging Markets includes

data for 1988–2017. Long-term average P/E for Developed Markets includes data for 1973–2016, U.S. 1926-2017. Foreign Developed – MSCI

EAFE Index, Emerging Markets – MSCI EM Index. Source: FactSet, Fidelity Investments (AART) as of 12/31/17.

DM Long-Term Average

US Long-Term Average

EM Long-Term Average

Forward

Equity Valuations Mixed Relative to History On a one-year-trailing-earnings basis relative to their own histories, U.S. price-to-earnings ratios are above

average, developed markets are below average, and emerging markets are roughly average. All valuations

have risen substantially over the past two years, although forward-looking estimates appear more reasonable.

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10

20

30

40

50

60

Ru

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Tu

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Bra

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So

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Ch

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U.K

.

EM

Italy

Sp

ain

Au

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Germ

an

y

DM

Ja

pan

Ind

on

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Me

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Fra

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Ca

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Ind

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Ph

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pin

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U.S

.

30

DM: Developed Markets. EM: Emerging Markets. Past performance is no guarantee of future results. It is not possible to invest directly in an index. All indices

are unmanaged. Please see appendix for important index information. LEFT: Price-to-earnings (P/E) ratio (or multiple): stock price divided by earnings per

share, which indicates how much investors are paying for a company’s earnings power. Five-year peak earnings are adjusted for inflation. Source: FactSet,

countries’ statistical organizations, Haver Analytics, Fidelity Investments (AART), as of 11/30/17. RIGHT: Source: Federal Reserve Board, Haver Analytics,

Fidelity Investments (AART), as of 12/31/17. MXN: Mexican peso, GBP: British pound, EUR: euro, CAD: Canadian dollar, JPY: Japanese yen.

Cyclical P/Es

Price/5-Year Peak Real Earnings

11/30/2017 20-Year Range

Valuation of Major Currencies vs. USD

Percentile Since 2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GBP MXN JPY EUR CAD

Year-End 2017Last 12-Month Range

Equity and Currency Valuations Attractive Relative to U.S. Using five-year, peak-inflation-adjusted earnings, P/E ratios for foreign-developed and emerging-equity markets

remain lower than those in the U.S., with many countries around the midpoint of their 20-year range. Despite

dollar weakness in 2017, the value of most currencies also remains in the lower half of historical ranges versus

the U.S. dollar. Both factors provide a relatively favorable long-term valuation backdrop for non-U.S. stocks.

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Past performance is no guarantee of future results. It is not possible to invest directly in an index. All indices are unmanaged. Please see

appendix for important index information. Percentile ranks of yields and spreads based on historical period from 1993 to 2017. MBS: mortgage-

backed security. Source: Bloomberg Barclays, Bank of America Merrill Lynch, JP Morgan, Fidelity Investments (AART), as of 12/31/17.

28%

21%

2%

16%

8%

10% 6%

12%

53%

29% 25%

23%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

1%

2%

3%

4%

5%

6%

7%

U.S. AggregateBond

MBS Long Gov/Credit CorporateInvestment Grade

CorporateHigh Yield

Emerging-MarketDebt

Fixed-Income Yields and Spreads (1993-2017)

Yield Yield and Spread Percentiles

Credit Spread Treasury Rates Spread Percentile Yield Percentile

Yields and Spreads Remain Low Relative to History Bond yields were mixed during the quarter, with some categories rising slightly and 30-year Treasury rates

falling. However, all yields for all categories remain well below their historical averages. Credit spreads

narrowed slightly during the quarter, making all credit sectors more expensive relative to their own histories.

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Past performance is no guarantee of future results. Sectors as defined by GICS. LEFT: Unshaded (white) portions above suggest no clear pattern of over- or underperformance

vs. broader market. Double +/– signs indicate that the sector is showing a consistent signal across all three metrics: full-phase average performance, median monthly difference,

and cycle hit rate. A single +/– indicates a mixed or less consistent signal. Source: The Business-Cycle Approach to Sector Investing, Fidelity Investments (AART), October 2016.

RIGHT: This chart is an illustrative example of the potential impact of choosing sectors that historically perform well in the current and potentially upcoming two phases of the

business cycle (mid/late/recession). Analysis selects one sector from each of the three phases (mid, late, recession) that demonstrated outperformance in one of those phases.

Sectors shown are equal-weighted (33.3%). Analysis excludes early cycle because an early cycle is unlikely to occur in the next several years. Sector returns represented by

S&P 500 sectors. Source: Haver Analytics, Fidelity Investments (AART), as of 12/31/17.

Business-Cycle Approach to Sectors

Sector Early Mid Late Recession

Financials +

Real Estate ++ --

Consumer

Discretionary ++ --

Info. Tech + + -- --

Industrials ++ + --

Materials -- ++ -

Consumer

Staples - + ++

Health Care - ++ ++

Energy -- ++

Telecom -- ++

Utilities -- - + ++

Illustrative Info. Tech/Energy/Health Care

Portfolio Relative Performance: 1962−2010

0%

5%

10%

Last Two Years ofMid

Last Year of Mid Late Cycle

Equal-Weighted Tech/Healthcare/Energy Portfolio

Annualized Excess Return

Sector Considerations: Intermediate-Term Cycle View A disciplined business-cycle approach to sector allocation can produce active returns by favoring industries

that may benefit from cyclical trends. By choosing a blended portfolio of sectors that have historically

performed well in the current and potentially upcoming cycle phases—for example, info tech (mid cycle),

energy (late cycle), and health care (recession)—it may be possible to generate excess returns.

Long-Term Themes

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Periodic Table of Returns

Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against loss. It is not possible

to invest directly in an index. All indices are unmanaged. Please see appendix for important index information. Asset classes represented by:

Commodities – Bloomberg Commodity Index; Emerging-Market Stocks – MSCI Emerging Markets Index; Foreign-Developed Country Stocks – MSCI

EAFE Index; Growth Stocks – Russell 3000 Growth Index; High Yield Bonds – Bank of America Merrill Lynch U.S. High Yield Index; Investment-Grade

Bonds – Bloomberg Barclays U.S. Aggregate Bond Index; Large-Cap Stocks – S&P 500 Index; Real Estate/REITs – FTSE NAREIT Equity Index;

Small-Cap Stocks – Russell 2000 Index; Value Stocks – Russell 3000 Value Index. Source: Morningstar, Standard & Poor’s, Haver Analytics, Fidelity

Investments (AART), as of 12/31/17.

Performance Rotations Underscore Need for Diversification The performance of different assets has fluctuated widely from year to year, and the magnitude of returns can

vary significantly among asset classes in any given year—even among asset classes that are moving in the

same direction. A portfolio allocation with a variety of global assets illustrates the potential benefits of

diversification.

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Legend

18% 75% 17% 38% 35% 35% 35% 66% 32% 14% 26% 56% 32% 35% 35% 40% 5% 79% 28% 8% 20% 39% 28% 5% 21% 38%Emerging-Market

Stocks

17% 33% 8% 37% 23% 33% 29% 34% 26% 8% 10% 47% 26% 21% 33% 16% -20% 58% 27% 8% 19% 34% 14% 3% 18% 30% Growth Stocks

15% 20% 3% 37% 23% 29% 21% 27% 12% 5% 4% 39% 21% 14% 27% 12% -26% 37% 19% 4% 18% 33% 13% 1% 18% 26%Foreign-Developed

Country Stocks

15% 19% 2% 30% 22% 24% 20% 24% 8% 2% -2% 37% 18% 12% 22% 11% -34% 32% 18% 4% 18% 32% 12% 1% 12% 22% Large Cap Stocks

11% 19% 1% 28% 22% 22% 14% 21% -1% -2% -6% 31% 17% 7% 18% 7% -36% 28% 17% 2% 16% 23% 11% 1% 12% 15% Small Cap Stocks

8% 17% 0% 20% 16% 20% 9% 21% -3% -4% -9% 31% 11% 5% 16% 6% -36% 27% 16% 2% 16% 19% 6% 0% 11% 15%60% Large Cap

40% IG Bonds

8% 10% -1% 18% 15% 13% 3% 12% -5% -4% -15% 29% 11% 5% 12% 5% -37% 26% 15% 0% 16% 7% 5% -4% 9% 13% Value Stocks

7% 10% -2% 15% 11% 10% -3% 7% -9% -12% -16% 28% 9% 5% 11% 2% -38% 20% 15% -4% 15% 3% 3% -4% 8% 9% REITs

5% 10% -2% 15% 6% 2% -18% 3% -14% -20% -20% 24% 8% 4% 9% -1% -38% 19% 12% -12% 11% -2% -2% -5% 7% 8% High-Yield Bonds

4% 4% -3% 12% 6% -3% -25% -1% -22% -20% -22% 19% 7% 3% 4% -2% -43% 18% 8% -13% 4% -2% -4% -15% 3% 4%Investment-Grade

Bonds

-12% -1% -7% -5% 4% -12% -27% -5% -31% -21% -28% 4% 4% 2% 2% -16% -53% 6% 7% -18% -1% -10% -17% -25% 2% 1% Commodities

LO

NG

-TE

RM

Secular Forecast: Slower Global Growth, EMs to Lead Slowing labor force growth and aging demographics are expected to tamp down global growth over the next

two decades. We expect GDP growth of emerging countries to outpace that of developed markets over the

long term, providing a relatively favorable secular backdrop for emerging-market equity returns.

35

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Italy

Ja

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Germ

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Sp

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Ne

the

rla

nds

Fra

nce

Au

str

alia

U.K

.

Ca

nad

a

Sw

ed

en

U.S

.

So

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Ko

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Ru

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Tu

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Th

aila

nd

Bra

zil

Co

lom

bia

Ch

ina

So

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Afr

ica

Me

xic

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Pe

ru

Ma

laysia

Ind

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Ph

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pin

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Ind

ia

Annualized Rate

EM: Emerging Markets. GDP: Gross Domestic Product. Source: OECD, Fidelity Investments (AART), as of 5/31/17.

Developed Markets Emerging Markets Last 20 Years

Global Real GDP Growth

Last 20 years 20-year forecast

2.7% 2.1%

Real GDP 20-Year Growth Forecasts vs. History

LO

NG

-TE

RM

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

GDP Growth (20-Year Average)

U.S. current yield (2.4%)

U.S. next 20 years forecast yield (3.6%)

36

Secular Rate Outlook: Higher than Now, Lower than History Over long periods of time, GDP growth has a tight positive relationship with long-term government bond

yields (yields generally have averaged the same rate as nominal growth). We expect interest rates will rise over

the long term to an average that is closer to our 3.6% nominal GDP forecast, but this implies they would settle

at a significantly lower level than their historical averages.

GDP: Gross Domestic Product. Source: Official Country Estimates, Haver Analytics, Fidelity Investments (AART), as of 12/31/17.

U.S. Secular Growth Forecast

Nominal Government Bond Yields and GDP Growth

10-Year Sovereign Yield (20-Year Average)

Historical Observations of Various Countries

LO

NG

-TE

RM

37

Myopic Loss Aversion Prompts Risk-Averse Behavior Myopic loss aversion describes a common bias in which greater sensitivity to losses than to gains is

compounded by the frequent evaluation of outcomes. Investors who review their portfolios more frequently

have tended to shift toward more conservative exposures, as increased monitoring raises the likelihood of

seeing (and reacting to) a loss.

Impact of Feedback Frequency on Investment Decisions

Monthly Yearly

In a study, subjects were assigned simulated conditions that were similar to making portfolio decisions on a monthly or yearly basis. Source: Thaler,

R.H., A. Tversky, D. Kahneman, and A. Schwartz. “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test.” The Quarterly

Journal of Economics 112.2 (1997), used by permission of Oxford University Press; Fidelity Investments (AART), as of 9/30/17.

Stocks 70%

Bonds 30% Stocks

41%

Bonds 59%

38

Appendix: Important Information Information presented herein is for discussion and illustrative purposes only and is not a

recommendation or an offer or solicitation to buy or sell any securities. Views expressed

are as of the date indicated, based on the information available at that time, and may

change based on market and other conditions. Unless otherwise noted, the opinions

provided are those of the authors and not necessarily those of Fidelity Investments or its

affiliates. Fidelity does not assume any duty to update any of the information.

Unless otherwise disclosed to you, any investment or management recommendation in

this document is not meant to be impartial investment advice or advice in a fiduciary

capacity, is intended to be educational and is not tailored to the investment needs of any

specific individual. Fidelity and its representatives have a financial interest in any

investment alternatives or transactions described in this document. Fidelity receives

compensation from Fidelity funds and products, certain third-party funds and products, and

certain investment services. The compensation that is received, either directly or indirectly,

by Fidelity may vary based on such funds, products and services, which can create a

conflict of interest for Fidelity and its representatives. Fiduciaries are solely responsible for

exercising independent judgment in evaluating any transaction(s) and are assumed to be

capable of evaluating investment risks independently, both in general and with regard to

particular transactions and investment strategies.

Investment decisions should be based on an individual’s own goals, time horizon, and

tolerance for risk. Nothing in this content should be considered to be legal or tax advice

and you are encouraged to consult your own lawyer, accountant, or other advisor before

making any financial decision. These materials are provided for informational purposes

only and should not be used or construed as a recommendation of any security, sector, or

investment strategy.

Fidelity does not provide legal or tax advice and the information provided herein is general

in nature and should not be considered legal or tax advice. Consult with an attorney or a

tax professional regarding your specific legal or tax situation.

Past performance and dividend rates are historical and do not guarantee future

results.

Investing involves risk, including risk of loss.

Diversification does not ensure a profit or guarantee against loss.

Index or benchmark performance presented in this document does not reflect the

deduction of advisory fees, transaction charges, and other expenses, which would reduce

performance.

Indexes are unmanaged. It is not possible to invest directly in an index.

Although bonds generally present less short-term risk and volatility than stocks, bonds do

contain interest rate risk (as interest rates rise, bond prices usually fall, and vice versa)

and the risk of default, or the risk that an issuer will be unable to make income or principal

payments.

Additionally, bonds and short-term investments entail greater inflation risk—or the risk that

the return of an investment will not keep up with increases in the prices of goods and

services—than stocks. Increases in real interest rates can cause the price of inflation-

protected debt securities to decrease.

Stock markets, especially non-U.S. markets, are volatile and can decline significantly in

response to adverse issuer, political, regulatory, market, or economic developments.

Foreign securities are subject to interest rate, currency exchange rate, economic, and

political risks, all of which are magnified in emerging markets.

The securities of smaller, less well-known companies can be more volatile than those of

larger companies.

Growth stocks can perform differently from the market as a whole and from other types of

stocks, and can be more volatile than other types of stocks. Value stocks can perform

differently from other types of stocks and can continue to be undervalued by the market for

long periods of time.

Lower-quality debt securities generally offer higher yields but also involve greater risk of

default or price changes due to potential changes in the credit quality of the issuer. Any

fixed-income security sold or redeemed prior to maturity may be subject to loss.

Floating-rate loans generally are subject to restrictions on resale, and sometimes trade

infrequently in the secondary market; as a result, they may be more difficult to value, buy,

or sell. A floating-rate loan may not be fully collateralized and therefore may decline

significantly in value.

The municipal market can be affected by adverse tax, legislative, or political changes, and by the

financial condition of the issuers of municipal securities. Interest income generated by municipal

bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by

an investor resident in the state of issuance, from state and local income taxes. Such interest

income may be subject to federal and/or state alternative minimum taxes. Investing in municipal

bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all

tax brackets. Generally, tax-exempt municipal securities are not appropriate holdings for tax-

advantaged accounts such as IRAs and 401(k)s.

The commodities industry can be significantly affected by commodity prices, world events, import

controls, worldwide competition, government regulations, and economic conditions.

The gold industry can be significantly affected by international monetary and political

developments, such as currency devaluations or revaluations, central bank movements, economic

and social conditions within a country, trade imbalances, or trade or currency restrictions between

countries.

Changes in real estate values or economic downturns can have a significant negative effect on

issuers in the real estate industry.

Leverage can magnify the impact that adverse issuer, political, regulatory, market, or economic

developments have on a company. In the event of bankruptcy, a company’s creditors take

precedence over the company’s stockholders.

39

Appendix: Important Information Market Indices

* Index returns on slide 22 represented by: Growth - Russell 3000 Growth Index; Large

Caps - S&P 500 Index; Mid Caps - Russell Midcap Index; REITs (Real Estate Investment

Trusts) - FTSE NAREIT Equity Index; Small Caps - Russell 2000 Index; Value - Russell

3000 Value Index; Canada – MSCI Canada Index; Commodities – S&P GSCI Commodities

Index; EAFE – MSCI Europe, Australasia, Far East Index; EAFE Small Cap – MSCI EAFE

Small Cap Index; EM Asia – MSCI Emerging Markets Asia Index; EMEA (Europe, Middle

East, and Africa) – MSCI EM EMEA Index; Emerging Markets (EM) – MSCI EM Index;

Europe – MSCI Europe Index; Gold – Gold Bullion Price, LBMA PM Fix; Japan – MSCI

Japan Index; Latin America – MSCI EM Latin America Index; ABS (Asset-Backed

Securities) – Bloomberg Barclays ABS Index; Agency – Bloomberg Barclays U.S. Agency

Index; Aggregate – Bloomberg Barclays U.S. Aggregate Bond Index; CMBS (Commercial

Mortgage-Backed Securities) – Bloomberg Barclays Investment-Grade CMBS Index; Credit

– Bloomberg Barclays U.S. Credit Bond Index; EM Debt (Emerging-Market Debt) – JP

Morgan EMBI Global Index; High Yield – BofA ML U.S. High Yield Index; Leveraged Loan

– S&P/LSTA Leveraged Loan Index; Long Government & Credit (Investment-Grade) –

Bloomberg Barclays Long Government & Credit Index; MBS (Mortgage-Backed Securities)

– Bloomberg Barclays MBS Index; Municipal – Bloomberg Barclays Municipal Bond Index;

TIPS (Treasury Inflation-Protected Securities) – Bloomberg Barclays U.S. TIPS Index;

Treasuries – Bloomberg Barclays U.S. Treasury Index.

BofA ML Corporate Real Estate Index, a subset of BofA ML U.S. Corporate Index, is a market

capitalization-weighted index of U.S. dollar-denominated investment-grade corporate debt publicly

issued in the U.S. domestic market by real estate issuers. Qualifying securities must have an

investment-grade rating (based on an average of Moody’s, S&P, and Fitch). In addition, qualifying

securities must have at least one year remaining to final maturity, a fixed coupon schedule, and a

minimum amount outstanding of $250 million. BofA ML U.S. Real Estate Index is a subset of the

BofA ML Real Estate Corporate Index; qualifying securities must have an investment grade rating

and an investment grade-rated country of risk. BofA ML U.S. High Yield Bond Index is a market

capitalization-weighted index of U.S. dollar denominated below-investment-grade corporate debt

publicly issued in the U.S. domestic market.

The BofA/Merrill Lynch High-Yield Bond Master II Index is an unmanaged index that tracks the

performance of below-investment-grade, U.S.-dollar-denominated corporate bonds publicly issued

in the U.S. domestic market. Bloomberg Barclays U.S. 1-3 (1-5) Year Government Credit

Index includes all publicly issued U.S. government and corporate securities that have a

remaining maturity between one and three (five) years and are rated investment grade.

Bloomberg Barclays U.S. 1-5 Year Credit Index is designed to cover publicly issued U.S.

corporate and specified non-U.S. debentures and secured notes with a maturity between

one and five years and meet the specified liquidity and quality requirements; bonds must

be SEC-registered to qualify. Bloomberg Barclays U.S. 1-5 Year Municipal Index covers

the one- to five-year maturity, U.S. dollar-denominated, tax-exempt bond market with four

main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and

pre-refunded bonds. Bloomberg Barclays ABS Index is a market value-weighted index

that covers fixed-rate asset-backed securities with average lives greater than or equal to

one year and that are part of a public deal; the index covers the following collateral types:

credit cards, autos, home equity loans, stranded-cost utility (rate-reduction bonds), and

manufactured housing. Bloomberg Barclays CMBS Index is designed to mirror

commercial mortgage-backed securities of investment-grade quality (Baa3/BBB-/BBB- or

above) using Moody’s, S&P, and Fitch, respectively, with maturities of at least one year.

Bloomberg Barclays Emerging Market Bond Index is an unmanaged index that tracks

total returns for external-currency-denominated debt instruments of the emerging markets.

Bloomberg Barclays Euro Aggregate Bond Index is a broad-based flagship benchmark

that measures the investment grade, euro-denominated, fixed rate bond market, including

treasuries, government-related, corporate and securitized issues. Bloomberg Barclays

Long U.S. Government Credit Index includes all publicly issued U.S. government and

corporate securities that have a remaining maturity of 10 or more years, are rated

investment grade, and have $250 million or more of outstanding face value. Bloomberg

Barclays Municipal Bond Index is a market value-weighted index of investment-grade

municipal bonds with maturities of one year or more. Bloomberg Barclays U.S. Agency

Bond Index is a market value-weighted index of U.S. Agency government and investment-

grade corporate fixed-rate debt issues. Bloomberg Barclays U.S. Aggregate Bond is a

broad-based, market-value-weighted benchmark that measures the performance of the

investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. Bloomberg

Barclays U.S. Corporate High Yield Bond Index is a market value-weighted index that

covers the universe of dollar-denominated, fixed-rate, non-investment grade debt.

Bloomberg Barclays U.S. Credit Bond Index is a market value-weighted index of

investment-grade corporate fixed-rate debt issues with maturities of one year or more.

Bloomberg Barclays U.S. Government Index is a market value-weighted index of U.S.

Government fixed-rate debt issues with maturities of one year or more. Bloomberg

Barclays Global Aggregate ex-USD Index Unhedged is a measure of global investment

grade debt from 24 local currency markets. This multi-currency benchmark includes

treasury, government-related, corporate and securitized fixed-rate bonds from both

developed and emerging markets issuers.

Bloomberg Barclays U.S. MBS Index is a market value-weighted index of fixed-rate

securities that represent interests in pools of mortgage loans, including balloon mortgages,

with original terms of 15 and 30 years that are issued by the Government National

Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), and

the Federal Home Loan Mortgage Corp. (FHLMC). Bloomberg Barclays U.S. Treasury

Inflation-Protected Securities (TIPS) Index (Series-L) is a market value-weighted index

that measures the performance of inflation-protected securities issued by the U.S.

Treasury. Bloomberg Barclays U.S. Treasury Bond Index is a market value-weighted

index of public obligations of the U.S. Treasury with maturities of one year or more.

Bloomberg Commodity Index measures the performance of the commodities market. It

consists of exchange-traded futures contracts on physical commodities that are weighted

to account for the economic significance and market liquidity of each commodity.

Dow Jones U.S. Select Real Estate Securities Index is a float-adjusted, market

capitalization-weighted index of publicly traded real estate securities, such as real estate

investment trusts (REITs) and real estate operating companies (REOCs).

Market Indices (continued)

FTSE 100 Index is a market capitalization-weighted index of the 100 most highly

capitalized blue chip companies listed on the London Stock Exchange. FTSE National

Association of Real Estate Investment Trusts (NAREIT) All REITs Index is a market

capitalization-weighted index that is designed to measure the performance of all tax-

qualified REITs listed on the NYSE, the American Stock Exchange, or the NASDAQ

National Market List. FTSE NAREIT Equity REIT Index is an unmanaged market value-

weighted index based on the last closing price of the month for tax-qualified REITs listed

on the New York Stock Exchange (NYSE).

The IA SBBI U.S. Small Cap Stock Index is a custom index designed to measure the

performance of small capitalization U.S. stocks. IA SBBI U.S. Intermediate-Term

Government Bond Index is an unweighted index that measures the performance of five-

year maturity U.S. Treasury bonds. Each year, a one-bond portfolio containing the shortest

non-callable bond having a maturity of not less than five years is constructed. IA SBBI U.S.

Long-Term Corporate Bond Index is a custom index designed to measure the performance

of long-term U.S. corporate bonds. IA SBBI U.S. 30-Day Treasury Bill Index is an

unweighted index that measures the performance of 30-day maturity U.S. Treasury bills.

JPM® EMBI Global Index, and its country sub-indices, tracks total returns for the U.S.

dollar-denominated debt instruments issued by Emerging Market sovereign and quasi-

sovereign entities, such as Brady bonds, loans, and Eurobonds. JPM® EMBI Global

Investment Grade Index, and its country sub-indices, tracks total returns for traded

external debt instruments issued by emerging-market sovereign and quasi-sovereign

entities rated investment grade.

MSCI® All Country (AC) Europe Index is a market capitalization-weighted index that is

designed to measure the equity market performance of Europe; it consists of the following

developed and emerging-market country indices: Austria, Belgium, Czech Republic, Denmark,

Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland,

Portugal, Russia, Spain, Sweden, Switzerland, Turkey, and United Kingdom. MSCI All Country

World Index (ACWI) is a market capitalization-weighted index that is designed to measure the

investable equity market performance for global investors of developed and emerging markets.

MSCI Europe Index is a market capitalization-weighted index that is designed to measure the

investable equity market performance for global investors of the developed markets in Europe.

MSCI Europe Financials Index (Total Return) captures large- and mid-cap representations of

financial securities across 15 developed-market countries in Europe, represented by the MSCI

Europe Index, MSCI Japan Financials Index (Total Return) captures large- and mid-cap

representations of financial securities across Japan, represented by the MSCI Japan Index, an

index designed to measure the performance of the large- and mid-cap segments of the

Japanese equity market. With 318 constituents, the index covers approximately 85% of the free

float-adjusted market capitalization in Japan. MSCI North America Index is a market

capitalization-weighted index designed to measure the performance of large- and mid-cap

segments of the U.S. and Canada markets. MSCI Pacific ex Japan Index is a market

capitalization-weighted index that is designed to measure the equity market performance of four

of the five developed market countries in the Pacific region including Australia, Hong Kong, New

Zealand and Singapore. MSCI World Index is a market capitalization-weighted index that is

designed to measure the investable equity market performance for global investors of

developed markets. MSCI World ex USA Index is a market capitalization-weighted index

designed to measure the equity market performance of developed markets excluding the U.S.

MSCI Emerging Markets (EM) Index is a market capitalization-weighted index that is designed

to measure the investable equity market performance for global investors in emerging markets.

MSCI EM Asia Index is a market capitalization-weighted index designed to measure equity

market performance in Asia. MSCI EM Europe, Middle East, and Africa (EMEA) Index is a

market capitalization-weighted index that is designed to measure the investable equity market

performance for global investors in the emerging-market countries of Europe, the Middle East,

and Africa. MSCI EM Latin America Index is a market capitalization-weighted index that is

designed to measure the investable equity market performance for global investors in the

emerging-market countries of Latin America. MSCI EM Large Cap Index is composed of those

securities in the MSCI EM Index that are defined as large-capitalization stocks.

MSCI Europe, Australasia, Far East Index (EAFE) is a market capitalization-weighted index

that is designed to measure the investable equity market performance for global investors in

developed markets, excluding the U.S. and Canada. MSCI EAFE Small Cap Index is a market

capitalization-weighted index that is designed to measure the investable equity market

performance of small-cap stocks for global investors in developed markets, excluding the U.S.

and Canada.

MSCI Canada Index is a market capitalization-weighted index designed to measure equity

market performance in Canada. MSCI Japan Index is a market capitalization-weighted index

designed to measure equity market performance in Japan. MSCI USA Index is a market

capitalization-weighted index designed to measure the equity market performance of the U.S.

MSCI REIT Preferred Index is a preferred stock market capitalization-weighted total return

index of certain exchange-traded perpetual preferred securities issued by U.S. Equity and U.S.

Hybrid REITs.

Russell 2000® Index is a market capitalization-weighted index designed to measure the

performance of the small-cap segment of the U.S. equity market. It includes approximately

2,000 of the smallest securities in the Russell 3000 Index. Russell 3000® Index is a market

capitalization-weighted index designed to measure the performance of the 3,000 largest

companies in the U.S. equity market. Russell 3000 Growth Index is a market capitalization-

weighted index designed to measure the performance of the broad growth segment of the U.S.

equity market. It includes those Russell 3000 Index companies with higher price-to-book ratios

and higher forecasted growth rates. Russell 3000 Value Index is a market capitalization-

weighted index designed to measure the performance of the small to mid-cap value segment of

the U.S. equity market. It includes those Russell 3000 Index companies with lower price-to-book

ratios and lower forecasted growth rates. Russell Midcap® Index is a market capitalization-

weighted index designed to measure the performance of the mid-cap segment of the U.S.

equity market. It contains approximately 800 of the smallest securities in the Russell 1000 Index.

40

Appendix: Important Information

41

Appendix: Important Information Market Indices (continued)

The S&P 500® Index is a market capitalization-weighted index of 500 common stocks chosen

for market size, liquidity, and industry group representation to represent U.S. equity

performance. S&P 500 is a registered service mark of The McGraw-Hill Companies, Inc., and

has been licensed for use by Fidelity Distributors Corporation and its affiliates. The S&P 500

Total Return Index represents the price changes and reinvested dividends of the S&P 500®

Index. The S&P SmallCap 600 is a market capitalization-weighted index of 600 small-

capitalization stocks. The S&P GSCI® Commodities Index provides investors with a reliable

and publicly available benchmark for investment performance in the commodity markets.

LIBOR is the London Interbank Offered Rate. It is the benchmark rate that some of the

world’s leading banks charge each other for short-term loans.

Global Policy Uncertainty Index a GDP-weighted average of national economic policy

uncertainty indexes for 18 countries. It reflects the relative frequency of own-country

newspaper articles that contain a trio of terms pertaining to the economy, policy, and

uncertainty.

The Sectors and Industries defined by Global Industry Classification Standards (GICS®),

except where noted otherwise. S&P 500 sectors are defined as follows: Consumer

Discretionary – companies that tend to be the most sensitive to economic cycles.

Consumer Staples – companies whose businesses are less sensitive to economic cycles.

Energy – companies whose businesses are dominated by either of the following activities:

the construction or provision of oil rigs, drilling equipment, and other energy-related

services and equipment, including seismic data collection; or the exploration, production,

marketing, refining, and/or transportation of oil and gas products, coal, and consumable

fuels. Financials – companies involved in activities such as banking, consumer finance,

investment banking and brokerage, asset management, insurance and investments, and

real estate, including REITs. Health Care – companies in two main industry groups: health

care equipment suppliers, manufacturers, and providers of health care services; and

companies involved in research, development, production, and marketing of

pharmaceuticals and biotechnology products. Industrials – companies whose businesses

manufacture and distribute capital goods, provide commercial services and supplies, or

provide transportation services. Information Technology – companies in technology

software and services and technology hardware and equipment. Materials – companies

that are engaged in a wide range of commodity-related manufacturing. Telecommunication

Services – companies that provide communications services primarily through fixed-line,

cellular, wireless, high bandwidth, and/or fiber-optic cable networks. Utilities – companies

considered electric, gas, or water utilities, or companies that operate as independent

producers and/or distributors of power.

Standard & Poor’s/Loan Syndications and Trading Association (S&P/LSTA)

Leveraged Performing Loan Index is a market value-weighted index designed to

represent the performance of U.S. dollar-denominated institutional leveraged performing

loan portfolios (excluding loans in payment default) using current market weightings,

spreads, and interest payments.

Other Indices

The Consumer Price Index (CPI) is a monthly inflation indicator that measures the

change in the cost of a fixed basket of products and services, including housing, electricity,

food, and transportation.

KOF Index of Globalization measures the economic, social, and political dimensions of

globalization and is calculated referring to actual economic flows, economic restrictions,

data on information flows, data on personal contact, and data on cultural proximity.

The London Bullion Market Association (LBMA) publishes the international benchmark

price of gold in USD, twice daily. The LBMA Gold price auction takes place by ICE

Benchmark Administration (IBA) at 10:30 and 15:00 with the price set in U.S. dollars per

fine troy ounce.

The Philadelphia Gold and Silver Index is a market-capitalization index of precious

metal mining company stocks.

A Purchasing Managers’ Index (PMI) is a survey of purchasing managers in a certain

economic sector. A PMI over 50 represents expansion of the sector compared to the

previous month, while a reading under 50 represents a contraction, and a reading of 50

indicates no change. The Institute for Supply Management ® reports the U.S.

manufacturing PMI®. Markit compiles non-U.S. PMIs.

S&P Global BMI Gold Capped Index is a modified market capitalization–weighted index

of stocks designed to measure the performance of companies that produce gold and

related products, including companies that mine or process gold and the South African

finance houses that primarily invest in, but do not operate, gold mines.

42

Appendix: Important Information Definitions

Correlation coefficient measures the interdependencies of two random variables that

range in value from −1 to +1, indicating perfect negative correlation at −1, absence of

correlation at 0, and perfect positive correlation at +1.

The Price-to-Earnings (P/E) ratio is the ratio of a company’s current share price to its

current earnings, typically trailing 12-months earnings per share. A Forward P/E

calculation will typically use an average of analysts’ published estimates of earnings for the

next 12 months in the denominator.

Excess return: the amount by which a portfolio’s performance exceeds its benchmark, net

(in the case of the analysis in this article) or gross of operating expenses, in percentage

points.

The Chartered Financial Analyst (CFA) designation is offered by the CFA Institute. To

obtain the CFA charter, candidates must pass three exams demonstrating their

competence, integrity, and extensive knowledge in accounting, ethical and professional

standards, economics, portfolio management, and security analysis, and must also have at

least four years of qualifying work experience, among other requirements.

Third-party marks are the property of their respective owners; all other marks are the

property of FMR LLC.

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Management® (FIAM), this publication may be provided by Fidelity Investments

Institutional Services Company, Inc., Fidelity Institutional Asset Management Trust

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